Get Out of Debt Guy

Can My Bank Really Charge Me a Late Fee on a Late Fee?

Posted August 22

Question:

Dear Steve,

My husband and I paid off a credit card with Citibank based on a 10 day pay off. Citibank then stated we owed another $44.74 in interest. They then charged a $35 late fee. I again called them to get a new pay off which was $109. We paid the $109 when in actuality, they added on another late fee of $35. So, instead of putting our $109 towards the interest and prior late fee, they are now charging us another $74.74 to include the interest and yet another late fee. I paid the interest today but I am at this time refusing to pay yet another late fee of $35. I am waiting for a call from a supervisor.

Can they charge us another $35 late fee if we do not pay the $35 late fee already added to the account? At this point, I am requesting a complete copy of our account and the policy. Also, can they apply all of our payment of $109 to the fees along, leaving the interest untouched so more fees can be compounded?

Melissa

Answer:

Dear Melissa,

Can Citibank charge you a late fee on a late fee? Yes.

The fact you were charged a $35 late fee indicates to me the balance was already late when you went to pay it off. Otherwise it would have been a $25 late fee. According to Citi, "Penalty fees will not exceed $25 for the first violation, and $35 for any additional violation of the same type that occurs within the next six billing cycles."

But the issue here is one of timing and asking for a supervisor is a smart thing to do. What you need most is clarification.

Payment due dates are really payment due times and unless a full payment is received and credited by the time it is stated it is due (typically 5 PM in the timezone specified by the bank), it can be recorded late and trigger another late fee. I always advise against people trying to send payments right before they are due. I'm not saying that's what you did in this situation.

Personally, I would pay the amount due over the phone, right now, and then make your case for a refund of an errant fee paid. You want to stop the late reporting and fees. The late reporting will appear on your credit report.

You could also file a complaint with the Consumer Financial Protection Bureau in an effort to get the fee back.

As far as the application of the payment, that is clearly spelled out in the terms of the card you agreed to. in general, payments are applied first to the minimum amount due, which may include the late fee. Anything leftover will goes towards the interest balance due.

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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.